A Certificate of Deposit (“CD”) is a financial instrument that a depositor may purchase from a financial institution. The CD has a specific term (e.g., three months, one year, etc.) during which it pays a particular rate of interest. The CD is said to mature at the end of the term. Upon maturity, the funds in the CD are withdrawn.
However, more often than not, the default disposition of CD funds at the time of maturity is to rollover the funds into another CD. For example, the terms of the CD may state that the funds in the CD upon maturity are rolled over into another CD of the same length term, at whatever interest rate the financial institution is paying for CDs of that term length at the time of the rollover. There is often a grace period—e.g., two weeks after the maturity date—during which the depositor may opt out of the rollover. Financial institutions typically do not send their depositors reminders or normally do not notify their depositors of an impending maturity, so a depositor who wants to exercise the opt-out would have to rely on a calendar to remind himself or herself of the maturity date. However, these types of reminders may be prone to error, or may otherwise be unreliable. Moreover, many financial institutions expect such an opt-out to be exercised in person during banking hours, making it difficult for some people to exercise the opt-out provision. Thus, many CDs are not disposed of in accordance with the depositors' intentions.